Can't Raise Money for Your Business?

You’re ready to dive into your billion dollar idea. Your business plan is solid and you are ready to move. Now all you need to do is raise the million dollars to get started and you’ll be on your path to business greatness. But wait… No one is giving you the money. Are they stupid? You can turn that million dollars into a billion in no time. You have the beautiful charts and graphs to prove it. So what is wrong?Here are five things that most people overlook when trying to raise money.

EXPERIENCE

When an investor looks at your idea they’re going to look at you next. There are plenty of ideas out there and your experiences of success within your field will make the difference. If this is your first business attempt and have little to no generated revenue, you’re not going to look so promising to any investor.Solution: Get some experience and stand out from the crowd by showing positive and fast revenue growth in that business first, not just hopes and dreams.

RISK

Every investment, school, stocks, bonds, people, etc is a risk. There’s a chance that you might have a nice paycheck at the end of the week, but there is also a chance of losing it all. When an investor gives you money, they will need to weigh this risk Are they more likely to lose it all, or hit it big? The biggest weighing factor can come down to you and your team.Solution: Prove that there are possible risks involved, but you mitigate it with assets built by the new company; and ensure right away that you can pay off or cover a complete loss.

OTHER PEOPLE

You’re not the only one with a bright idea. I know some investors that look at over 2,000 pitch decks a year and go with only 4 or 5; that’s a 0.25% chance with all things being even. And guess what? All things are not even. You’re competing with many other people and decks who’ve done this dozen of times and started more than one business.Solution: Stand out in the crowd. This is not easy, but getting practice with pitching to people is important. Getting their feedback to make improvements down the road is even more important.

RETURN ON INVESTMENT

Typical business investors are not looking for a Bank CD type return on their investment. They are looking for a 25X on their investment in usually 18-24 months. This is much harder than it seems. For example, if an investor gives you $500k to start, they want to see that initial investment be worth over $10 Million dollars in just 2 years. That’s a huge increase.Solution: Make sure that the growth plan in your pitch includes a huge upswing, but also different models of growth depending on the amount of the investment. Don’t count on raising all the money on your first request; plan to get started with a smaller seed investment.

WHAT THE INVESTOR CAN CONTRIBUTE

I recall a story in the book “The Richest Man in Babylon” about the five laws of gold, specifically law number IV.“Gold slippeth away from the man who invests it in businesses or purposes with which he is not familiar or which are not approved by those skilled in its keep.”[caption id="attachment_12493" align="aligncenter" width="600"]

Source: LinkedIn[/caption]Savy or successful investors are going to put their money into an industry or system that they know well enough already, otherwise they will run into 2 problems. One, they cannot assist you when you have questions of that industry or connections. Two, they cannot read the market well enough, which can increase the possibility for risk of losing their investment.Solution: Talk to investors who already have experience in your industry of interest.My recommendation? Get your hands dirty. Use the little money you have to prove that your product and idea will work. Investors just want to put fuel (money) on the fire that you already started. Bootstrap yourself and you may find that you don’t need anyone’s money at all; you will be a lot happier for it, too.